Correlation Between Treace Medical and Outset Medical

Can any of the company-specific risk be diversified away by investing in both Treace Medical and Outset Medical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Treace Medical and Outset Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Treace Medical Concepts and Outset Medical, you can compare the effects of market volatilities on Treace Medical and Outset Medical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Treace Medical with a short position of Outset Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treace Medical and Outset Medical.

Diversification Opportunities for Treace Medical and Outset Medical

0.8

Correlation Coefficient

Treace Medical  Outset Medical

Very poor diversification

The 3 months correlation between Treace and Outset is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset Medical and Treace Medical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Treace Medical Concepts are associated (or correlated) with Outset Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset Medical has no effect on the direction of Treace Medical i.e., Treace Medical and Outset Medical go up and down completely randomly.

Pair Corralation between Treace Medical and Outset Medical

Given the investment horizon of 90 days Treace Medical is expected to generate 2.01 times less return on investment than Outset Medical. But when comparing it to its historical volatility, Treace Medical Concepts is 1.37 times less risky than Outset Medical. It trades about 0.14 of its potential returns per unit of risk. Outset Medical is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Outset Medical on September 14, 2024 and sell it today you would earn a total of  69.00  from holding Outset Medical or generate 132.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Treace Medical Concepts  vs.  Outset Medical

Treace Medical Concepts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Outset Medical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treace Medical and Outset Medical

The main advantage of trading using opposite Treace Medical and Outset Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treace Medical position performs unexpectedly, Outset Medical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Outset Medical will offset losses from the drop in Outset Medical's long position.

The idea behind Treace Medical Concepts and Outset Medical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.